Data flows, artificial intelligence and international trade: impacts on value chains of the future

Data flows, artificial intelligence and international trade: impacts on value chains of the future

The European Parliament Research Service recently published an in depth analysis report on Data flows, artificial intelligence and international trade: impacts and prospects for the value chains of the future for its Members.

Socio-economic effects of digital trade and artificial intelligence on EU industries Artificial intelligence and new digital technologies are transforming digital trade. They facilitate the development of new business models of trade and reduce the geographical barriers of economic transactions. Such transformations are quite useful for the small and medium enterprises.

Artificial intelligence is being adopted by both digital and non-digital sectors, but its adoption varies a great deal across countries, including within the EU. Data and information flow play a crucial role in digital trade by allowing personalization. Digital trade is not new, but it is taking new forms that are ushering a new phase of globalisation. So far digital trade mainly affected trade in goods, including through global value chains, though some service activities have already become more tradeable thanks to digital technologies.

The new phase of globalisation driven by artificial intelligence and new digital technologies is likely to do for services what the previous phase did for manufacturing: to vastly increase trade between advanced and emerging economies. This prospect raises important issues for domestic policies and trade policy.

The brief provides a legal analysis of existing rules in digital trade regarding the various components of artificial intelligence (‘AI’), in particular (personal and non-personal) data, computer code in the form of algorithms, and computing power (including cloud computing). To do so, the first part of this analysis will map various international trade rules that affect cross-border flows of data, computer code and computing power to determine their respective advantages and disadvantages. This will form the basis for the second part of the analysis, which will address the desirability and necessity of global rulemaking in this area.

The in-depth analysis discusses issues in trade in digitally deliverable services and the geopolitics of digital trade policy. Digitally deliverable services are becoming increasingly important for global value chains, both in terms of final products exported to other countries, and in terms of inputs embedded in manufactured goods.

To harness the potential of digital trade in services, both the regulation of the digital means by which a service is traded and the regulation of the services themselves have to be accommodative. Digital trade policy is still in its infancy, and many challenges in terms of policy and measurement remain. Looking at regulation of data flows, the EU’s focus on privacy policy is incompatible with the laissez-faire approach pursued by the US administration and the political control of the internet by the Chinese government, limiting the potential for trade in digitally deliverable services and plurilateral agreements on digital trade. However, a number of other major economies are following similar approaches to the EU, which creates the potential for cooperation and intensifying trade in digital services. The EU should also increase its competitiveness in this strategically important services sector by completing the single market with respect to services and capital, and by strengthening research and development in digital technologies.

The full in depth analysis is available : https://www.europarl.europa.eu/RegData/etudes/IDAN/2020/653617/EXPO_IDA(2020)653617_EN.pdf

Photo Credit : https://www.europarl.europa.eu/committees/en/webinar-on-data-flows-artificial-intelli/product-details/20201104WKS03061

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